RateCaptain
  • FX Rates
  • Money Market
  • Cryptocurrency
  • Commodities
  • Corporates
  • Contact Us
No Result
View All Result
Subscribe
  • FX Rates
  • Money Market
  • Cryptocurrency
  • Commodities
  • Corporates
  • Contact Us
No Result
View All Result
RateCaptain
No Result
View All Result
Home Business

NESG: Multiple Exchange Rates in Nigeria Impedes Required Flow of Foreign Investments.

Rate Captain by Rate Captain
August 9, 2022
in Business, Currencies, Economics
Reading Time: 3 mins read
A A
0
NESG: Multiple Exchange Rates in Nigeria Impedes Required Flow of Foreign Investments.
Share on FacebookShare on TwitterShare on WhatsappShare on Telegram

The Nigerian Economic Summit Group (NEGS) has highlighted that the multiple exchange rates in Nigeria continue to erode the much-needed capital inflow, including foreign direct investment as the country’s exchange rate management exposes international investors to many risks.

This was disclosed in a report by the policy advocacy group on its website – A communique from the meeting of the Board of Directors of the Nigerian Economic Summit Group.

AlsoRead

Nigerian Small Businesses Struggle as Petrol Price Hike Adds to Economic Woes.

US Nation’s Employers Add 339,000 Jobs in May, Defying Market Expectations.

Global Equities and U.S. Treasury Yields Decline Amid Uncertainty Over U.S. Debt Ceiling Vote.

NESG stated that “the failure to address the currently prevailing condition of multiple exchange rates continues to reduce the much-needed flow of foreign investments and official diaspora remittances. Being savvy and rational, international investors will not invest where there is a real risk to their ability to access and repatriate investment proceeds or when the functional currency is in sporadic depreciation.”

Nigeria’s foreign exchange management since the beginning of 2022 has remained focused on maintaining the official Investors and Exporters (I&E) Window exchange rate artificially stable through foreign exchange restrictions and administrative measures. But the presence of multiple foreign exchange markets with wide premiums gives rise to speculations and round-trip trading which affects the efficiency of the foreign exchange market.

According to NESG, Multiple foreign exchange (FX) markets with significant price differentials create room for speculation, round-tripping, cronyism, and outright graft – with an attendant adverse effect on the economy. There is no better time to harmonize the FX rates than now.

In addition to the exchange rate management issues in Nigeria, the institution’s key public servant’s heated rhetoric and unrestrained statements continue to hamper capital inflow and investors’ confidence in the market. Considering the information-sensitive nature of the foreign exchange market, comments of the Apex Bank will trigger perceptions in people and investors, thereby making them take actions that can adversely affect the market.

What the World Bank is Saying

The World Bank, in the June Nigeria Development Update (NDU), stated that the favorable external conditions arising from oil prices reaching a 9-year high present an opportunity for Nigeria to adjust the exchange rate reflective of market dynamics. The international lender said,

“Clarity on exchange rate policy, and transparency in its management, are necessary to attract more significant capital inflows, including foreign direct investments.”

”Allowing further gradual adjustment in the IEFX rate, where the CBN manages the price, would help eliminate misalignment and alleviate persistent FX pressures.”

The World Bank believes that Nigeria’s exchange rate management is too rigid as it continues to fuel inflation and discourage investment.

According to Bode Agusto, a consultant on economics, finance, and business strategy who believes that pegging the naira to the US dollar, which is one of the ways of managing exchange rates, can only work for Nigeria if it earns a lot of dollars with little inflation differential with the United States. He noted Nigeria’s inability to sell USD at 420/1 to all those who want to buy it has led to the development of a parallel market that commands a large premium. He said “at 420/1, everyone wants to buy USD from the Central Bank of Nigeria (CBN) but no one wants to sell it. This means that a rate of 420/1 is below equilibrium and is unsustainable. Nigeria has tried several times in the past to peg the NGN to the USD and has failed every time.” 

Bode recommended the adoption of a crawling peg currency management. This means that a country starts at a near market exchange rate and then allows its currency to depreciate (or appreciate) against the USD by close to the difference in annual inflation. “Today, this means starting at an NGN/USD exchange rate of around 600/1 and then allowing the currency to depreciate by around 10% per year. It also means allowing knowledgeable willing buyers to do business with knowledgeable willing sellers at contracted rates. The CBN may intervene in the market when rates are significantly higher or lower than its target. Kenya and Botswana have successfully managed their exchange rates for several years using this option,” he said.

Previous Post

Naira Stables at the Investors and Exporters (I&E) Window, Maintains N428.12/$

Next Post

Job Report Prompts Bitcoin’s Rally

Related News

Nigerian Small Businesses Struggle as Petrol Price Hike Adds to Economic Woes.

Nigerian Small Businesses Struggle as Petrol Price Hike Adds to Economic Woes.

by Rate Captain
June 6, 2023
0

The recent removal of petrol subsidy and subsequent surge in petrol prices have dealt another blow to Nigeria's already beleaguered...

US Nation’s Employers Add 339,000 Jobs in May, Defying Market Expectations.

US Nation’s Employers Add 339,000 Jobs in May, Defying Market Expectations.

by Rate Captain
June 2, 2023
0

In a surprising turn of events, the US nation's employers showcased their strength in the job market by adding a...

Nigerian Banks to Demand Tax Clearance Certificate Before Customers Can Buy Dollars, Other Foreign Currencies

Global Equities and U.S. Treasury Yields Decline Amid Uncertainty Over U.S. Debt Ceiling Vote.

by Rate Captain
May 31, 2023
0

Global equities and U.S. Treasury yields experienced a downward trend on Wednesday as bearish sentiment dominated the markets. Investors anxiously...

South African Rand Plunges to New Low as Interest Rates Rise

South African Rand Plunges to New Low as Interest Rates Rise

by Rate Captain
May 29, 2023
0

The South African economy has been facing a turbulent period, marked by worsening electricity shortages, rising inflation, and recent allegations...

Next Post
Job Report Prompts Bitcoin’s Rally

Job Report Prompts Bitcoin’s Rally

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recommended

DMO Announces Subscription Offering for Federal Government Savings Bonds.

DMO Announces Subscription Offering for Federal Government Savings Bonds.

June 6, 2023
Nigeria Agrees to Cut Crude Production for Global Oil Market Stability.

Nigeria Agrees to Cut Crude Production for Global Oil Market Stability.

June 6, 2023

Popular Story

  • Providus Bank Plc Announces Graduate Management Trainee Program 2023/2024.

    Providus Bank Plc Announces Graduate Management Trainee Program 2023/2024.

    0 shares
    Share 0 Tweet 0
  • Nigeria’s Leading Crypto Marketplace Patricia Suffers Severe Security Breach

    0 shares
    Share 0 Tweet 0
  • CBN – FG incurred N930.8bn Fiscal Deficit in January and February 2023.

    0 shares
    Share 0 Tweet 0
  • Interpol, Kenya Government Probe Three Nigerian Fintech Tycoons over N128 Billion from Nigeria

    0 shares
    Share 0 Tweet 0
  • SEC Files Lawsuit Against Binance and CEO Changpeng Zhao for Alleged Regulatory Violations.

    0 shares
    Share 0 Tweet 0
RateCaptain

RateCaptain

We bring you the most accurate in new and market data. Check our landing page for details.

  • FX Rates
  • Money Market
  • Cryptocurrency
  • Commodities
  • Corporates
  • Contact Us

Copyright © 2022 RateCaptain - All rights reserved by RateCaptain.

No Result
View All Result
  • FX Rates
  • Money Market
  • Cryptocurrency
  • Commodities
  • Corporates
  • Contact Us

Copyright © 2022 RateCaptain - All rights reserved by RateCaptain.

RateCaptain
?>